Surprise problems with houses are usually stressful and can be needlessly expensive. As a seller, knowing in advance if your home has serious deficiencies may save you money. As a buyer, having comprehensive inspection reports prior to making an offer can be invaluable.

Despite the benefits, only a small fraction of all homes that come on the market in our area have pre-sale general inspection reports.

Differentiating inspections

There are, basically three types of home inspections:

Pest control. Also referred to as termite inspections, these are commonly completed by most sellers prior to putting their home on the market. Pest control, however, refers only to actual or potential wood damage caused by infection or infestation. Many sellers assume the worst problems will show up in a pest control report. This is often not the case.

General, home or contractor’s inspection. This covers the major systems in a house: foundation, roof, electrical, heating, plumbing and framing. It also includes drainage, seismic retrofitting and other important items.

Home inspectors are generalists; they generally specialize in one or two areas, but are not experts in every aspect.

Inspections by specialists. When a specific concern arises which is outside the realm of the home inspector, he will recommend an additional inspection by a qualified individual. For example, if the inspector suspects a cracked heat exchanger in the furnace, he will suggest bringing in a licensed heating contractor. If the question involves foundation, soils or drainage, an engineer would most likely be consulted.

For sellers, knowing about problems in advance allows time to shop for competitive bids. They can either have the work done prior to close of escrow, or credit the buyer the amount of their lowest bid. This invariably results in savings.

On one of my recent listings, during a pre-sale inspection, the inspector had some questions about the foundation of this 1907 brown shingle. As it came up before marketing, we were able to get an engineer’s letter ready to present to potential buyers. This satisfied the eventual buyer and saved time and aggravation during escrow.

Information prior to making offer

In today’s frenetic seller’s market, buyers may feel pressured to make decisions without sufficient data. When competing for the same house, how can buyers make a well reasoned offer without understanding the condition of the property? Before making an offer, some buyers want to have their own inspection.

Not surprisingly, many sellers do not allow this. Such reports, for various reasons, may not accurately characterize the home's condition. And, once they are written up, the seller would be obligated to disclose them to future prospects. Even if the seller allows it, a buyer must think carefully about spending upwards of $400 on inspections when he may not get an accepted contract.

In multiple offer situations, some buyers, wanting to improve their offer, will accept a known deficiency "As Is," without any cost to the seller. If, on the other hand, the buyer finds out about the defect only after his offer is accepted, he will be much less likely to take responsibility without compensation.

Coercion to "go along"

After beating out the competition, and agreeing to pay a premium for a home, some buyers face another, unexpected obstacle. Once their inspections have been completed, they may discover some problems and expect the seller to handle them.

What follows is a non-too-subtle reminder from the listing (seller’s) agent that there is a backup offer in place in case the winning buyer becomes too demanding after inspections. The assumption is that the next buyer will not ask for much, if anything.

Unfortunately, some buyers, nervous that they may never find another house they like, cave in. They purchase a home with significant structural, health or safety issues, the ramifications of which they do not truly comprehend.

Why are pre-sale inspections so rare?

Some sellers believe they will save money by allowing the buyer to pay for his own inspection reports. They do not see this as an investment in protecting themselves.

By not recommending a pre-sale inspection, some agents believe they are avoiding problems which may never surface. They also may feel that buyers will still want their own inspections, not trusting those ordered by the seller.

Finally, doing pre-sale inspections on a house with deferred maintenance can sometimes lead to months of laborious work and follow-up. Not everyone, seller or agent, is willing to go through this process.

Minimize surprises

The truth is that these inspections can save heartache and dollars for everyone involved. Even if the buyer chooses to have a separate inspection, the seller will have his own inspector to consult if any controversies arise.

Assuming the buyer is qualified, the most prevalent cause of failed transactions is unresolved problems which come up during the escrow. Inspections in advance minimize this risk.

Final thoughts

Sellers have the choice of thoroughly inspecting their property before advertising it for sale. Buyers must understand that condition is a critical component of value. A home sale and purchase can and should be a positive experience for all parties. Pre-sale inspections go a long way toward insuring this.

Related Articles: Home Inspections, part 1,  part 2; Not Just Termites, part 1 and part 2